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Organisation Design

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Organisation Design

Have you ever wondered how organisations choose their designs? Typically, an organisation selects its design according to its nature, objectives, and culture. But there are still many other factors that influence organisational design selection, let's explore them!

Organisational design is the process of organising the company's structure so that it is aligned with organisational culture and objectives. Organisations are aimed to be designed in a way that they function the most effectively and efficiently as possible.

The key aspect of organisational design is establishing the flow of the decision-making processes. This is known as a hierarchy.

Hierarchy can entail two opposite organisational designs. Firstly, organisations that implement formal or rigid hierarchical structures, follow formal protocols in which each hierarchical level has clearly defined roles and responsibilities. The communication within and between hierarchical levels is usually formal.

On the other hand, the organizations that follow an informal or flat hierarchy design do not formally establish employees' roles and responsibilities, instead, employees have flexibility regarding their duties and responsibilities. Additionally, communication between employees and managers is usually informal.

Elements of organisational design

There are a few important elements that organisations follow when designing or redesigning the organisational structure.

  • The span of control shows the number of employees that the manager is responsible for. There are two types: a wide span of control is when one manager is responsible for many employees, and a narrow span of control is when managers are responsible for only a few employees.

  • Chains of command describe the organisational structure in terms of how employees are reporting to one another depending on their hierarchical level. For example, in the centralized structure, the bottom hierarchy will be reporting to the one hierarchical level above them, and so on. In the decentralized structure, the reporting will flow horizontally.

  • Levels of hierarchy describe the number of management levels that organisations have. This refers to two traditional ways of designing an organizational structure that is either tall or flat. Tall organisations usually follow a formal structure that has many hierarchical levels. A flat structure usually has fewer or no levels of hierarchy and follow an informal structure.

  • Levels of authority show the level of power that managers have in an organization over their subordinates to make decisions. The higher the authority level the more power managers have. The number of authority layers is usually similar to the number of hierarchy levels in organizations with rigid hierarchy structures. While, in a flat structure, there are few or no levels of authority as every employee has a certain level of authority to make decisions.

What are the reasons for improving organisation design?

Organisations may consider improving and changing their organisational design because of various reasons that are:

  • Organisational growth can influence businesses to start incorporating more formal structures to avoid chaos and keep the company organized.

  • If the current organisational structure is complex and costly managers may be motivated to make the organizational design more simple and reduce its costs.

  • Employees need more motivation as the current organizational design does not engage or motivate them.

  • The quality of a company's services or goods requires improvement

How to improve the organisational design?

Once the key reasons to improve the organisational design are identified it is time for managers to take action and start making changes to the organisational design.

In the next section, we will touch upon different ways of how organisational design can be improved.

Focusing on employees to improve organisational design

One of the methods for improving organizational design is to put the main focus on the people working in the organisation, as employees are the ones who will bring value to the organization. The goal is to develop an organisational design that will fit their needs and motivate them to work effectively.

The workforce can be focused on in three ways:

  1. Workforce roles - This includes different roles that employees undertake in the organisation. Chief executives, managers, team leaders, supervisors, team members. The organisation must consider how these roles are designed in terms of given tasks and responsibilities.

  2. Workforce loads - The workload that employees must complete within the set period. The chief executives may have a larger workload compared to the team members. Organisations should pay attention if the workloads are too heavy for their workforce.

  3. Job allocation - This refers to the task allocations for different job roles. In the company, it must be considered whether tasks are allocated formally and follow the formal guidelines of how to complete them or employees have the freedom to discuss set tasks with managers and choose how they are going to complete them. Organisations should allocate tasks and methods to complete them in a way that suits the employees' preferences.

By focusing on the workforce, organisations can discover what needs to be changed in the organisational design to improve the workforce motivation and overall performance in the organisation.

Methods of improving organisation design

  • Delayering - One of the ways of improving the organisational design is to remove layers from the tall organisational structure. This can bring benefits to organizations such as lowering labour costs, increasing the speed of the decision-making process, quicker communication and increased innovations. Employees will no longer have to follow strict regulations and will have more freedom that will encourage creativity and innovation.

  • Delegation - This is the process of assigning tasks and responsibilities to another person. In this case, management can assign tasks to other managers at lower levels and reduce top-level management's workload to help them to focus on main tasks. The lower level management and team members' motivation will increase as they will get to carry out some level of responsibility.

  • Employee empowerment - Managers should make employees feel that their jobs count, which can be down by giving them more responsibility, trusting employees with various tasks and giving them feedback. By empowering employees, organisations might notice improvements in organisational performance as empowered employees are likely to perform better.

Organisational design models

The organisational models are developed to assist businesses in designing an effective organizational structure. The main principles that organizational design models follow are:

  • Evaluate the organisation's current design and its efficiency

  • Visualize the key points of future successful organizational design

  • When designing an organization consider its purpose, values, culture, visions and missions

There are a few established organisational models and one of them is identified as McKinsey's 7s model.

Mckinsey 7s model

This organization design model aims to analyze organizational design effectiveness through the interactions of seven elements that belong to two categories of either hard or soft elements.

The hard elements are:

  • Strategy - Defines ways of how the organization will achieve its set goals and objectives.

  • Structure - This is the way an organization has organized its hierarchical levels, which can be represented through the organizational chart.

  • Systems - Defines processes and procedures of how decision making flows.

The soft elements are:

  • Skills - The organisation's ability to perform well in certain areas, especially concentrating on the field of expertise of the organisation.

  • Staff - The organisation should pay attention to employees' management process and its effectiveness regarding the staff's performance.

  • Style - This refers to the way senior-level managers are managing the workforce and how the decision-making process flows in the organisation.

  • Shared values - This is the core aspect of this model as this refers to shared norms and values that holds the organisation together. Therefore, all other elements in this model have to align with this specific element.

Organisation design, Organisational design models, McKinsey 7s model, StudySmarter

Figure 1. Mckinsey 7s model, StudySmarter

The value to a business of changing the organisational design

Changing organisational design can help businesses keep up with the new trends and execute new strategies. If the organization has changed its strategy it has to adapt its design to make sure that the strategy is running smoothly and goals are attained.

If the company transitions from a start-up to a bigger company. To implement this new transition effectively the company needs to alternate its design. When the company was a start-up, a flat and informal structure worked effectively. However, once it becomes a bigger organization, with more employees, it needs to adapt its design and implement a more formal structure with more hierarchical levels to organize the workforce effectively. This change of organizational design can assist the company to organize its workforce to achieve its organisational goals.

When the company is expanding internationally. The organization can change the design of its organizational structure in different subunits to work more effectively and efficiently internationally. For example, in the US, most organizations are designed in a way that implements direct and informal communication flow which works effectively. In Japan, organisational communication normally flows vertically and formally and follow rigid hierarchies. By adjusting organizational designs to different international norms, companies can be more effective in employing local talent and comply with cultural standards internationally.

Overall, organizations are changing their design to achieve strategic goals and objectives and to become more effective and efficient. A successful redesign should focus on allocating resources where needed, to achieve strategic priorities, grow, reduce occurring costs and make decision making more effective.

Organisation design - key takeaways

  • Organisational design is the process of organizing the company's structure to align it with organizational culture and objectives and maximize organizational efficiency and effectiveness.
  • There are three key elements of design organisationally Which are: 1) The span of control 2) Chain of command 3) Levels of hierarchy 4) Levels of authority.
  • Key reasons for improving organisational design are organisational growth, the current organizational structure is complex and costly, employees require more motivation, the quality of the company's goods or services requires improvement.
  • Organisational design can be improved by focusing on employees in three important ways that are: 1) Workforce roles 2) Workforce loads 3) Job allocation
  • The methods of improving organisational design are 1) Delayering 2) Delegation 3) Employee empowerment.


SOURCES:

1. Michael Goold and Andrew Campbell, Designing Effective Organizations: How to Create Structured Networks, 2002

Frequently Asked Questions about Organisation Design

Large organisations use service design to:

  • Avoid chaos and keep the company organised as the organisation grows. 
  • Simplify the organisational structure for easier management and lower costs. 
  • Motivate and engage employees.
  • Improve the quality of goods and services.

The organisational structure can be improved by focusing on employees (workforce roles, workloads, job allocation) and adopting organisational design improvement methods (delayering, delegation, employee empowerment). 

Organisational design is the organisation of the company's structure to match the company's culture and objectives while maximising organisational effectiveness.  

Organisational design helps the business to adapt to the changing business strategy so as to function efficiently and achieve new objectives. The improvement in organisational design also allows the company to keep up with new trends in the industry. 

Final Organisation Design Quiz

Question

What is organisational design?

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Answer

Organisational design is the process of organising the company’s structure so that it is aligned with organisational culture and objectives. Organisations are aimed to be designed in a way that they function the most effectively and efficiently as possible.

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What is a hierarchy?

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The structure of the way the decision-making process flows in the organisation.

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What is the difference between rigid and flat hierarchies?

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Organisations that follow rigid hierarchical structures, implement formal protocols, employees have clearly defined roles and responsibilities. The communication within and between hierarchical levels is usually formal. In contrast, organisations that follow a flat hierarchy design do not formally establish employees’ roles and responsibilities instead employees have flexibility regarding their duties and responsibilities. Additionally, communication between employees and managers is usually informal.

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What are the key elements of organisational design?

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The chains of command, the span of control and levels of hierarchy.

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What are the key reasons for improving organisational design?

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Organisational growth, the current organisational structure is complex and costly, employees need more motivation and the quality of a company’s services or goods requires improvement

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What are the key tips for improving organisational design?

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  1. Solving business problems first
  2. Maximising efficiency of the employees
  3. Building accountability and responsibility in all organisational levels
  4.  Build on existent organisational strengths
  5.  Ensuring that hierarchy fits the organisational purpose

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Why should the organisational redesign focus on employees?

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Because employees are the ones who bring value to the organisation. So, the goal is to develop an organisational design that will fit their needs and motivate them to work effectively.

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In what key ways organisational redesign can be focused on people?

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By focusing on workforce roles, workforce loads and job allocation.

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What are the key methods of improving organisational design?

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Delayering, Delegation and Employee empowerment.

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What is meant by Delegation?

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This is the process of assigning tasks and responsibilities to another person. For example, authority can assign tasks to other managers at the lower level and reduce top-levels management’s workload and help them to focus on main tasks.

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What is the key organisational design model?

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Answer

The Mckinsey 7s model.


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What are the key elements of the Mckinsey 7s model?

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There are seven of them which fall into either the hard or soft elements category.

Hard elements are: Strategy, Structure, Systems

Soft elements are: Skills, Staff, Style, Shared values


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How can redesigning the organisation can benefit a business?


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Answer

Changing organisational design can help businesses to keep up with the new trends and execute new strategies.

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What is an example of how organisational redesign has benefited the organisation?

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For example, if the company transitions from a start-up to a bigger company. To implement this new transition effectively the company needs to alternate its design. When the company was a start-up, a flat and informal structure worked effectively. However, once it becomes a bigger organisation it needs to adapt its design and implement a more formal structure with more hierarchical levels to organise the workforce effectively. This change of organisational design can assist the company to organise its workforce and achieving organisational goals.

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Question

What is job design?


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Answer

Job design is the process of establishing employees’ duties and responsibilities that will be included in their roles. 


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What are the key elements involved in job design?


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The key elements involved in the job design are 1) Task 2) Motivation 3) Resource allocation 4) Reward system.


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What is meant by the job design element ‘resource allocation’? 


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In this context resource allocation means that the company allocates its resources in the most effective and efficient way possible to maximise employees’ productivity and innovations in their roles.

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What are the important aspects of job design?


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1) Job simplification 2) Job rotation 3) Job enrichment 4) Job enlargement

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What is meant by the ‘Job enlargement’?


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This is when more duties and tasks are added to the job role horizontally, meaning that even though the variety of duties and tasks will increase the employees will stay at the same hierarchical level.

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Why job design is important?


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Job design is important because it is a guidance that employees will follow when performing their roles. Additionally, a well-designed job will help employees to develop their skills, increase motivation and productivity which will have a positive impact on the company’s performance.

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What is an example of a poorly designed job?


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An example of a poorly designed job is when duties that are listed in the job description are unclear, involve too many or two little tasks.


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What are the outcomes of the poorly designed job?

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The poorly designed job can bring negative outcomes for the company such as low-performance rates, high staff turnover.

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What are the steps involved in the job design process?

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The job design process involves key steps, which are:

  • Deciding on important content that will be displayed on the job description
  • Consideration of skills and techniques that are required to perform a job
  • Deciding on the job hours in regards to if the job will be full time or part-time 
  • Avoiding listing tasks that can be done by machines
  • Make sure there are no occurring conflicts with other jobs
  • Establishing the relationships in the organisation that the role requires

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Why job design process is important when designing jobs?

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The job design process is important as it helps HR managers to design job that is effective and important in the organisation. Moreover, by following this process managers can avoid errors such as setting employees wrong working hours.

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What are the main job design models?

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The key job design models are Taylorism, Socio-technical systems approach and Core Characteristics model.

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What are the key aspects of the Socio-technical systems approach?

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The key aspects include:

  • The designed job should fit organisational goals
  • The employee’s needs should be considered when designing a job
  • Establishing good relationships with peers and supervisors 
  • Create an environment in which employees feel supported
  • Technical requirements that are needed to perform a job should be displayed
  • This design should provide a high-quality working life for employees
  • The changes to the job design should be made consistently according to changing environmental pressures.

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What are the key differences between the Socio-technical systems approach and the Taylorism model?

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The socio-technical systems approach is focusing on the social and technical aspects of the job and highly focuses on making a job that will fulfil employees’ needs. On the other hand, Taylorism focuses on implementing scientific methods that increased the maximisation of efficiency rather than the fulfilment of employees.

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What are the main job characteristics?

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The main job characteristics are Skill variety, Task Identity, Task significance, Autonomy, Feedback.

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What is the example of task significance?

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Task significance is the extent to which a task is important in the organisation. For example, a doctor has a high task significance as not everyone will be able to do their job and their role requires qualifications. Doctors’ everyday tasks of consulting patients are important for hospitals to function.

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If the job characteristics are incorporated into the job design what are the experienced psychological states by employees?

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The experienced psychological states are:

  • Experiences of meaningfulness
  • Experiences of responsibility
  • Knowledge of outcomes

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How the incorporation of job characteristics into the job design will impact organisational performance?

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The incorporation of job characteristics will help employees to experience positive psychological states which will lead to outcomes such as increased job satisfaction, motivation and productivity. This will positively impact the organisation as organisational performance are likely to improve.

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What is the definition of Hackman and Oldham’s job characteristics model?

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Hackman and Oldham’s job characteristics model is one of the key models regarding employees’ motivation at work. This model focuses on looking closer into the individual task design included in the job role rather than the job as a whole.

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What are the other ways to name Hackman and Oldham’s model?

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Answer

 The Job Characteristics Theory (JCT) and Core characteristics model.

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What does the model focus the most on?

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This model focuses on increasing employees’ satisfaction at work by incorporating job characteristic elements into the job design. The five elements are Task variety, Task identity, Task significance, Task anatomy and Task significance.

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When was this model created?

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 in the 1970s

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What are the principles of this model?

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Task variety, Task identity, Task significance, Task anatomy and Task significance.

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What is meant by the task identity?

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 Task identity means that tasks that are assigned to employees should feel whole and complete. Meaning that employees’ involvement in the task should be from start to the finish rather than only being responsible for adding small parts to the whole task.

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 If job characteristics are implemented what psychological states will the employees’ experience?

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 Experience of meaningfulness, the experience of responsibility and experience of outcomes.

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How does implementation of feedback benefit employees?


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 Feedback will benefit employees as it will communicate the further improvements that employees could be making in their job roles. This will assist employees in improving their work performance.


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What is an example of task significance?

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 For example, temporary employees such as administrators have low task significance as the majority of people will have the ability to send emails and answer phone calls. On the other hand, the doctor has a high task significance as not everyone will be able to do their job and their roles require qualifications. Moreover, doctors everyday tasks of consulting patients are important for hospitals to function.

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What is the difference between task identity and task significance?


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The task identity means that tasks that are assigned to employees should feel whole and complete. Meaning that employees’ involvement in the task should be from start to the finish rather than only being responsible for adding small parts to the whole task. On the other hand, task significance means the extent to which a task has importance in the organisation.

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 What are the key advantages of Hackman and Oldham’s job characteristics model?


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1) The model provides a clear and simple structure that can be easily incorporated into the job design 

2) The model has a clear connection between the job characteristics and outcomes of employees’ satisfaction at work. 

3) This model communicates how to design jobs in a way that they are motivating, engaging and challenging for employees 

4) This model positively influences employees’ performance.

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 How can this model contribute to achieving organisational goals?

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This model aims to increase employees’ satisfaction at work and more satisfied employees are likely to work harder and perform better. Better employees performance will contribute to achieving organisational goals.

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What are the key limitations of this model?


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1) This model may be outdated and may not fit the current trends of effective job design. 

2) This model does not take into account that some employees do not need these job characteristics to be satisfied at work 

3) This model does not focus on individual employees needs in regards to job satisfaction.

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Why may this model not fit the current job design trends?


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Hackman and Oldham’s model assumed that all organisations should incorporate similar job characteristics in their job designs. However, now organisations design jobs based on their core competencies and each job design includes different features to be effective. The job characteristics model follows the ‘one fits all approach’ this approach to job design may not be fitted to today’s trends.

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Question

Do all employees need to have job characteristics implemented into their roles to be satisfied?

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No, because some employees may not desire to have job characteristics incorporated in their jobs such as flexibility of organising their work or be required to have a variety of skills to perform a job. This may even cause employees burdensome and dissatisfaction.

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What is the human resource flow?

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Human resource flow describes the way employees ‘flow’ throughout the organisation. It explains employees’ journey from the begging when entering the company to the end when exiting the organisation.

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How many steps are included in the human resource flow model?

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Answer

3 steps.

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What are the steps included in the human resource flow model?

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Answer

Inflow, Throughflow, Outflow.

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What does human resource flow describe?

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The employee’s life cycle in the organisation.

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